The Chinese have been dominating the race for technological supremacy for the greater part of the last 10 years. A booming domestic market and global export reach, aided by government backing to drive innovation, have allowed China to reach new frontiers in technology and new heights in market dominance. In January of 2021, Alibaba was ranked 9th largest company in the world with a market value of 648.320 Billion USD. Huawei, one of the largest tech companies in the world, has operations in over 170 countries worldwide.
But what is the full story here? How did these tech companies become giants in spite of cut-throat competition from Silicon Valley? And why is the Chinese government cracking down on these companies seemingly driving their tech industry to the ground?
The astonishing success of China’s tech industry is the result of a combination of factors favoring local business, entrepreneurship, and also a lot of venture capital investment. The tech giants of China have enjoyed a massive market, thanks to the country’s huge population, with very little foreign competition due to government restrictions. Rapid economic growth also favors investing in new and innovative technologies. China is also the world’s largest market for skilled and low-cost manufacturing workforce. This has allowed China to overtake the US in cutting-edge technologies like AI, telecommunication infrastructure, smartphone manufacturing, etc.
Social media and cloud services also make up a huge part of the tech landscape in China. Software giants like Baidu and Tencent, and newcomers like ByteDance and DiDi get to enjoy uncontested market capitalization, as most foreign apps and cloud services are either banned or restricted by the government. This has led the Chinese software market to become one of the fastest-growing markets in the world. According to a report from the Chinese Ministry of Industry and Information Technology, the software industry generated 3.56 trillion yuan (approximately 580 Billion USD) in the first half of 2020. The global pandemic also boosted the country’s social media usage to record-breaking highs, a trend that has continued all throughout 2021.
The major tech companies of China each had to innovate in their own fields to conquer the Chinese market and then expand globally. Companies like Alibaba and Baidu have survived the fierce competition from heavyweights like Google, Microsoft, and Amazon. Huawei, despite being wounded by the US ban, still continues to be the largest telecom equipment company in the world. So let’s take a look at five of the biggest tech companies in China and how they are dominating the global market.
Baidu is the largest search engine in China. Baidu holds 78% of the search market in China where google holds only a single-digit market share. The company provides search-related services, news, advertising, and marketing solutions. Its consumer services include maps, news, encyclopedia, antivirus software, and of course online shopping.
Baidu was founded in January 2000 by Robin Li and Eric Xu. It’s headquartered in Beijing and currently one of the largest internet technology companies in the world, and the sixth-largest search engine used worldwide. Baidu is also one of the world leaders in Artificial Intelligence.
The company invests heavily in AI research, focusing on speech and dialogue understanding and generation. Baidu has just unveiled its newest AI-powered chatbot PLATO-XL, trained with over a billion samples of language in both English and Chinese. The model is considered to be one of the most advanced chatbots commercially available right now.
One of the key strategies behind Baidu’s success is its compliance with the Chinese government’s strict censoring policies. The company’s adherence to the government’s extensive guidelines has earned it the nickname, “the Great Firewall of China.”
At a Glance:
- Headquarters: Beijing
- CEO: Robin Li
- Number of employees: 41,000
- Market cap: 56.5 Billion USD
The Alibaba group is one of the largest tech companies in the world. Alibaba.com is the biggest B2B e-commerce platform in the world, with 925 million active mobile users and 31.8 Billion USD revenue in the first quarter of 2021. Its biggest source of income is by import and export of wholesale products through its huge online platform. Other major sources include advertising, entertainment, online transactions, and cloud services.
Alibaba was founded in December 1999, by Jack Ma with the vision to revolutionize online trade in China. Starting as a humble English teacher, Jack Ma’s story has become nothing short of a legend. As of November 2021, his net worth is 40.6 Billion USD. Under his leadership, Alibaba has acquired businesses like messaging apps, healthcare technology manufacturing, taxi-hailing services, supply-chain management operations, venture capital investing, Yahoo! China, and even a movie studio. In China, the sheer scope of the Alibaba Group is a force to be reckoned with.
One of the biggest reasons why Alibaba is as successful as it is today is its alignment with the Chinese government. Beijing’s policy of strict control of the web means foreign companies like Amazon or eBay aren’t able to operate effectively, leaving the 2.1 Trillion USD market completely open for Alibaba to enjoy. The Chinese government also used Alibaba’s platform for various inter-agency businesses, providing Alibaba a huge boost in revenue.
At a Glance:
- Headquarters: Hangzhou
- CEO: Daniel Zhang
- Number of employees: 251,000
- Market cap: 431 Billion USD
Xiaomi still isn’t recognized as a major player in the smartphone market in the US market. But globally, it has become one of the largest smartphone manufacturers, overtaking Apple to become the second-largest smartphone brand in the world, Samsung being the first. In Q2 2021, Xiaomi earned 87.8 Billion RMB (estimated 13.7 Billion USD), showing a staggering 64% increase year-over-year.
Xiaomi’s business strategy has been the key to its amazing success. Starting out as a small startup back in 2010 by founder Lei Jun and six partners, Xiaomi was built from the ground up to disrupt the Chinese electronics industry. In 2011, Xiaomi released its first smartphone, by 2014, it had the largest share of smartphones sold in China. The secret was a solid foundation in the hardware and software of the devices, sold very close to the cost of manufacturing and bill of materials. Xiaomi stole the market from under its competitors by constantly providing a better product at a better price. In 2019, Xiaomi made the Forbes Global 500 and has been there for three consecutive years as the youngest company on the list.
Since then Xiaomi has evolved into a global designer and manufacturer of electronics ranging from smart TVs, and household appliances to electric bikes, and drones. But it has maintained its focus on the smartphone market. Through a portfolio of sub-brands like Redmi, Pocophone, and Blackshark, Xiaomi has been able to penetrate markets in South Asia, Africa, and even Europe. In June 2021, Xioami’s operating system software MIUI had over 450 million active monthly users.
At a Glance:
- Headquarters: Beijing
- CEO: Lei Jun
- Number of employees: 22,000
- Market cap: 65.77 Billion USD
Tencent is a technology conglomerate holding company that invests in various tech sectors like Internet services, entertainment, AI, etc. It is the first Asian company to be evaluated over 500 Billion USD and is the most valuable publicly-traded company in China with investments in over 600 companies worldwide. Most of the tech giants coming from China are rooted in hardware and manufacturing. But Tencent is special because its success stems from software and services development.
Tencent was founded in 1998 in Shenzhen China, where it is headquartered. Its most popular services include Tencent QQ and WeChat, the latter being the most popular messaging app in China. In the second quarter of 2021, WeChat had over 1.25 billion monthly active users.
Tencent is also a hugely popular name in the mobile gaming industry. Lightspeed and Quantum Studio groups are concerns of Tencent’s gaming division and are responsible for global sensations like PUBG Mobile and Call of Duty: Mobile. In Q2 2021, Tencent reported 21 Billion USD in revenue, 30% of which was from its mobile gaming venture, earning 6.3 Billion USD. Most of this revenue comes from advertisements and in-app purchases and payments through their plethora of games and related services.
At a Glance:
- Headquarters: Shenzen
- CEO: Ma Huateng
- Number of employees: 85,000
- Market cap: 565 Billion USD
Huawei is the global leader in telecommunications infrastructure and also one of the leading tech companies in the world. Huawei designs and manufactures electronic devices like smartphones, laptops, smart wearables, IoT devices, etc. It is also one of the world leaders in 5G network technologies, outpacing its rivals in the US. In 2012, Huawei beat Ericsson as the largest telecommunications manufacturer in the world, and in July 2020, it overtook Samsung as the top smartphone brand in the world according to the number of phones shipped.
Huawei was founded in 1987 by former Chinese military officer Ren Zhengfei in Shenzen, China. The company initially made phone switches, as an effort to reduce dependence on foreign companies for maintaining the country’s communications infrastructure. Huawei has since then expanded out of China and established itself as a global leader in telecommunications with operations in over 170 countries and 93rd on the Forbes list for the most valuable brands in 2020.
Although still being one of the biggest players in the 5G market, Huawei has suffered quite a blow to its smartphone venture after the US ban in 2019, after allegations that it shared sensitive user information with the Chinese government. This crippled Huawei’s entire smartphone division, cutting it off from essential services from Google, not to mention US carriers. But since then Huawei has tried to shift its focus back on the domestic market, where it has lost major ground to Xiaomi and by launching Harmony OS, its in-house replacement OS for Google’s Android.
At a Glance:
- Headquarters: Shenzen
- CEO: Ren Zhengfei
- Number of employees: 197,000
- Market cap: 154 Billion USD
The Beijing Crackdown
A surprise draft by China’s State Administration for Market Regulation back in November 2020, issued guidelines that turned the tech industry upside down. These guidelines were a warning to the major tech companies against monopolistic and anti-trust business practices. The legislative crackdown that began last year has decimated the stock prices of some of the largest tech companies in the world like Tencent and Alibaba. In the past few months, wiped out 823 Billion USD from share values as of July 2021.
The companies that took the biggest hit were Alibaba and Tencent, controlling a huge part of the online services market in China, dealing with everything from messaging to sending money or taking loans. These companies have long been accused of anti-trust violations like the compulsory collection of user data, strong-arming vendors, and blocking fair competition.
The COVID-19 pandemic saw a never-before-seen surge in online activity in the Chinese population, forced indoors by lockdowns. It is believed that the jump in the sheer volume of users magnified these issues, prompting the administration to take action.
As the Chinese tech giants continue to lose ground, their future seems uncertain. Many believe that the dive will continue for the coming months until the market reorients to the new reality. But the if historic versatility of the Chinese tech industry has taught us anything, it’s that this is the type of short-term setback that they can bounce back from.
The major tech companies of China are now taking heat from the place they least expected, their own backyard. As the Chinese government continues its crackdown in an effort to reduce the anti-competitive nature of the tech industry, the resulting fallout in nearly wiping it off the map.
But the silver lining here is that these companies have proven that they are nothing if not resilient. Alibaba and Tencent are already working on ways to adhere to the new guidelines issued by the state, making cyberspace better for both businesses and consumers. Huawei is still on track to beat the US in the 5G battleground, despite its losses in the smartphone business. These giants truly show us how willpower is the greatest weapon in the face of adversity.
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